The Dutch pension asset manager's Asia Pacific head of real estate says his team has just had one of its busiest years ever and that 2021 is looking similarly promising.
Andreas Neuber, Seoul-based CEO and chairman of the JVÆs board of directors, says this culminates in a three-year entry strategy for UBS. He joined UBS in Zurich in 2004 to run institutional and wholesale sales in Europe. He moved to Hong Kong in early 2006 to oversee the firmÆs acquisition of Standard CharteredÆs asset management business in India. In August 2006 he moved to Seoul to spearhead the firmÆs market entry. He reports to Christof Kutscher, Tokyo-based managing director and Asia-Pacific head for UBS Global Asset Management.
The firm has been keen to enter South Korea because of the marketÆs size, second in the region only to Japan, and initially considered all options, from a solo greenfield to an outright acquisition. It came to realise that its best strategy was to work closely with a domestic partner. ôOver time we found the market different from any others that we as a firm have experienced,ö Neuber says.
These characteristics include a rapidly changing regulatory environment, as the government attempts to position Seoul as a financial hub, which requires locals with an ear to the ground; the reliance upon personal relationships to drive business and the need for a well-known brand; and the paucity of English speakers.
Dimco is one of KoreaÆs oldest fund managers, with a history extending back to 1962. Typical of the industry, it has been controlled (and until now 100% owned) by a securities firm û the old Daehan Investment & Securities which, in the current reshuffling of Korean financial institutions, is now called Hana Daetoo Securities. This is technically the JV partner with UBS. It is one of four businesses directly beneath the Hana Financial Group umbrella, along with an insurance company, an investment bank and a commercial bank.
The business was an attractive partner to UBS because of its roots, its size û with W19.9 trillion ($22 billion) of assets û and what UBS perceives to be a strong client focus throughout the Hana empire.
UBS Group does not have other formal arrangements with Hana Financial Group and while Hana may be interested in working with UBS to build its own wealth-management business, no further JVs or stakeholdings are planned, says Neuber.
Taking a majority stake was an accepted part of the plan since the two firms began working together two years ago, with UBS providing informal assistance in return for market intelligence. This reflected in part a desire by both parties to avoid the complications of a 50/50 arrangement. ôYou need someone in control,ö Neuber says.
He stresses, however, that the business will not be run unilaterally by UBS, but as a joint venture. Shin Joon-sang, a 15-year veteran at Hana, has served as CEO at Dimco for the past six months, following a long period in which the old guard of senior executives left or were let go. He will now serve as deputy CEO under Neuber, but other senior positions will continue to be run by Koreans. ôThis is a Korean shop and must be run by Koreans,ö Neuber says, adding the JV is keen to retain the existing staff.
ôI donÆt expect a hiring spree,ö he says, but the firm will look to insert three to five UBS executives as well as make some local hires. In particular it needs new heads for equity and fixed income investment teams, which will be local Koreans, although UBS will add senior marketing people as deputies.
Although large in size, Dimco is considered by market sources as something of a dinosaur. Other top-three asset managers such as the old Hyundai Investment Trust were slimmed down (in HyundaiÆs case after being acquired by Prudential Financial) because a lot of those assets were unprofitable bond and money-market funds.
Neuber says around 80% of UBS Hana AMÆs assets are in fixed income or similar types of products, and 20% in equities or other asset classes such as real estate and infrastructure. It is also largely domestic at a time when aggressive fund houses are introducing international products.
UBS intends to reorient the JV toward international equities, and the team is readying four new products for regulatory approval: East European equities, Latin American equities, Indian equities and a global socially responsible investments fund. ôBut we are not going to aggressively launch hot products,ö Neuber says. ôWe will instead develop a full product range for investors.ö
The biggest test will be moving the new company from under the safety of Hana Financial GroupÆs wing and expose it more directly to competition. ôHopefully the staff will like the challenge,ö Neuber says. UBS also plans to train the JV staff and introduce programs to develop the in-house talent. UBS will also help the JV integrate its risk management and compliance systems with UBSÆ platform.
Mega players Nippon Life and Dai-ichi Life are looking for opportunities in higher-yield single-A US corporate bonds, which offer more appealing yields than stagnant domestic offerings.
The “lower for longer” monetary policy and stimulus packages, coupled with the rolling out of vaccine programmes favorably support real estate investing in the region, with offices and data centres presenting forward-looking opportunities.
As US fixed income default rates rose and yields fell during the pandemic, are Asian bonds, which have had more stable yields through 2020, looking more attractive?
Insto roundup: Norway's Oil Fund praises China governance efforts; NPS commits $100m to taxi-hailing app
Norway's Oil Fund welcome Chinese proposals improving transparency and shareholder protection; HK's MPF assets surge 35% year on year; Korea's NPS commits $100m to TPG consortium to invest in taxi-hailing app; Poba commits W270bn to European property; Malaysia's EPF sees investment income rise 59% year-on-year in first quarter, and more.